How soon can you file your federal income tax return in 2020?
Earlier is generally better. As soon as you have all relevant documentation in hand, you can file with the IRS. Employers have until the end of the year to send out their W-2s. Most other tax forms will go out during this time as well.
What happens if you miss the deadline to file taxes?
The deadline to file your state and federal tax return is April 15, 2021, for nearly every individual and business in the country, though some exceptions exist. It's important to file your taxes on time. If you know that you won't be able to make the original deadline, you can always file for an extension, but only as a preemptive measure. If you are granted an extension, you will have until Oct. 15 to file.
If you fail to meet the deadline and owe the IRS money, you could be charged with a failure-to-file penalty. You can incur this penalty even if you pay taxes but fail to pay everything that you owe. According to the IRS, the penalty is "usually 5% of the tax owed for each month, or part of a month that your federal return is late, up to a maximum of 25%." Once you're over 60 days late, the minimum penalty for a late filing is either $210 or 100% of the tax you owe, whichever is the smaller amount.
If you fail to pay your taxes on time, the IRS will charge a failure-to-pay penalty that's half of 1% of the unpaid taxes due. While that may not seem like much, that penalty compounds.
If you fail to file but are owed a refund from the government, the consequences become far less dire. The IRS does not levy any penalties against taxpayers who file late and are owed money from the IRS. Taxpayers have a three-year grace period to claim their tax refund, though if they miss that deadline, the money will go to the U.S. Treasury.
Which tax filing software is the best?
Through our review process, we determined that Intuit TurboTax is the best overall online tax filing software on the market. Its extensive features and easy-to-use interface, coupled with the ability to get remote help from a CPA, make it a strong solution for most individuals and small businesses. With excellent customer service to guide users through the tax filing process, TurboTax sets itself above its competitors.
What is the easiest tax software to use?
H&R Block's online software for self-employed filers is incredibly easy to use. Self-employed individuals already have a lot on their plates, so the fact that H&R Block's software makes filing taxes easier is a huge boon.
You can import tax returns from other platforms you used in previous years to speed up data input. Self-employed taxpayers who sign up for the company's Self-Employed package can use the software to find each relevant business tax deduction (and other beneficial rules) that lower their tax burden while increasing their potential tax return.
The software's interface is easy to navigate, and unlike some of its competitors, H&R Block lists its tax filing costs upfront, giving you an idea of how much the service will cost. The service also gives its users access to professional help, though that service costs extra.
Why would you use tax preparation software?
There are many reasons why business owners use tax preparation software ‒ speed and accuracy are the two major factors. With tax software, data input is as easy as scanning an existing form for the relevant information to be automatically added into the appropriate fields. What would take hours to complete by hand takes just minutes with a computer or mobile device.
As for the accuracy factor, errors or omissions can be detrimental to a taxpayer. Such mistakes can lead to audits, fines and other injunctions, like levies against your assets. Tax software checks your filing for errors before sending your documents to the IRS. Most tax software also checks for deductions or credits that apply to your tax situation, potentially increasing the amount you receive in a return.
Should I hire a tax professional?
Whether you hire a professional like a CPA or a tax preparer to handle your small business's taxes depends on a wide range of factors. No two business' tax situations are the same – the decision should ultimately come down to the complexity and filing status of your company.
Your business's tax filing process is very different from filing your personal taxes. While most individuals file a simple 1040, businesses require complex tax forms that vary, depending on the structure of the business. Your personal life also plays a major part in your business's filing needs, as important life situations like your marital status, number of dependents and any income from a different state all matter.
Ultimately, whether you hire a professional comes down to time and money. If you can afford it and don't think you have enough time to run your business and still file on time, you should hire a pro. Similarly, if you're worried that you may improperly file your business taxes, risking your own money and your business because of costly errors, hire a tax professional.
Ready to decide which tax software is right for your business? Here are more resources for you to consider before making your decision: